Good month for Canadian manufacturers, but can it last?

OTTAWA (Reuters) - Canadian factory sales bounced back in August after a two-month slump and foreign investors continued to favor the country's capital markets that month, according to data on Tuesday that contrasted with gloomy reports on Monday.

The unexpected 1.5 percent jump in manufacturing sales in August from July brought sales to the highest level since March and suggested the economy picked up speed that month.

But in the longer run, most economists are still calling for modest growth at best.

Statistics Canada said big gains in the oil sector partly explained the strength, but also cautioned that the data would likely be revised as oil refineries gradually resume normal operations after partial shutdowns between April and June for maintenance and retooling.

After outperforming the United States since the global financial crisis and recouping all the jobs lost in the downturn, Canada's economy is being buffeted by global woes. Manufacturers are particularly exposed to the sluggish U.S. economy.

Adding to the uncertainty, domestic economic data has flip-flopped between upbeat and gloomy, leading analysts to second-guess the numbers.

"We would fade the headline strength in manufacturing sales, as this number could be revised lower by Statistics Canada," said Mazen Issa, Canada macro strategist at TD Securities.

"Moreover, set against the backdrop of weak foreign demand, the prospects for a robust rebound in manufacturing activity over the balance of the year are dim," he wrote in a research note to clients.
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